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How can you handle VAT on international invoices?

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If you are a corporate accountant who deals with international invoices, you need to know how to handle value-added tax (VAT) correctly. VAT is a tax that is added to the price of goods and services sold within certain countries or regions, and it can have different rates and rules depending on where you and your customers are located. In this article, we will explain how you can handle VAT on international invoices in four steps: determine your VAT obligations, register for VAT if needed, charge and collect VAT appropriately, and report and pay VAT to the relevant authorities.

本文章的要点总结

Identify your VAT obligations:

Determine VAT requirements based on both your location and that of your customers. This ensures you charge the correct VAT rate and follow appropriate registration rules.### *Register before selling:Obtain necessary VAT registrations, such as local or foreign VAT numbers, before initiating sales. This helps avoid penalties and ensures compliance with tax authorities.

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MARIO A ZALDIVAR S

CPA, GMBA & Nearshoring Advisor
Amit Mittal

Founder @ Route2Market? | Business…

1 Determine your VAT obligations

The first step to handle VAT on international invoices is to determine your VAT obligations based on your country of residence, your customer's country of residence, and the type of goods or services you are selling. For example, if you are a UK-based company selling digital services to customers in the EU, you need to follow the EU VAT rules for cross-border digital services, which require you to charge VAT based on your customer's location and register for the VAT Mini One Stop Shop (MOSS) scheme. However, if you are selling physical goods to customers in the EU, you need to charge VAT based on your location and register for VAT in each EU country where you exceed the distance selling threshold. You can find out more about the VAT rules for different countries and regions on the websites of their tax authorities or consult a tax advisor.

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MARIO A ZALDIVAR S

CPA, GMBA & Nearshoring Advisor
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De acuerdo a la operación deberás identificar el tratamiento del IVA en las exportaciones. Por ejemplo: Productos, servicios, intangibles, por medio de plataformas, etc. Y al tipo de productos en caso de que sean controlados.

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Yaw Asare

Grants Finance Specialist
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Local tax advisors are helpful in tax circumstances, as many countries have not fully gone online and not all of their tax laws/rules can be found on their websites. Aside this, even if you find some of the rules online, there may be other rules/laws that must be read in tandem with others, and the local advisors will know more about this.

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Петко Петков
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The VAT tax could be "tricky" if not observed in details before you start business. In EU many countries have different VAT registration threshold - the main principle is where is located the customer, who will receive the goods. It is mandatory to know this treshold if you will be selling goods in these countries. For example - if you have an e-shop in Bulgaria and are selling goods to people in Germany, you should register for VAT, according to the German VAT law, regardless of where your company is located. Also, if your company (in Bulgaria for example) uses services from companies, situated in France (for example) you are obligated to make a VAT registrations, regardless of the VAT law treshold.

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Amit Mittal

Founder @ Route2Market? | Business Enabler, Growth Pad
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In India, the VAT is referred to as GST (Goods and Services Tax). The tax obligation for the seller is on the place of supply. Being a destination-based tax, i.e., the goods/services will be taxed at the place where they are consumed and not at the origin. So, the state where they are consumed will have the right to collect GST.

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2 Register for VAT if needed

The second step to handle VAT on international invoices is to register for VAT if you are required to do so by the tax authorities of the countries or regions where you sell your goods or services. Depending on the VAT regime, you may need to register for a local VAT number, a foreign VAT number, or a special scheme like MOSS. You should register for VAT before you start selling to avoid penalties and fines. You should also keep track of your VAT registration numbers and update them if they change.

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Amit Mittal

Founder @ Route2Market? | Business Enabler, Growth Pad
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Every business and commercial establishment selling goods or providing services has to register under the applicable GST regime. There are a few exemptions and thresholds but a registration is highly recommended.

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Yaw Asare

Grants Finance Specialist
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Yes. An important part of VAT regimes which Governments are particular about, is the periodic filing of VAT returns to the tax Authorities. In Ghana for instance, you can incur penalties for failing to file VAT(and other tax) returns on their due dates.

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3 Charge and collect VAT appropriately

The third step to handle VAT on international invoices is to charge and collect VAT appropriately based on the VAT rate and rules of the countries or regions where you sell your goods or services. You should include the VAT amount and rate on your invoices and show your VAT registration number if applicable. You should also keep records of your sales and VAT transactions for at least six years or longer if required by the tax authorities. You should also be aware of any exemptions, zero-ratings, or reverse charges that may apply to your sales and adjust your invoices accordingly.

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4 Report and pay VAT to the relevant authorities

The fourth and final step to handle VAT on international invoices is to report and pay VAT to the relevant authorities according to their deadlines and procedures. Depending on the VAT regime, you may need to file monthly, quarterly, or annual VAT returns and pay the VAT due to the local, foreign, or special tax authorities. You should also claim any VAT refunds or credits that you are entitled to. You should use the currency and exchange rate that the tax authorities specify and keep proof of your payments and receipts.

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Adeyemi Aladesawe

Assistant Director Head/RPP at MTO Abuja
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Avoid over or under invoicing. Account for every invoice and keep proper record of all VAT invoices. Ensure invoice inclusive of VAT is issued and obtained according on every supply.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Michael Kamau

Finance Controller/Project Manager/Project Accountant
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1. Ensure that the invoice complies with formatting, language, and content. Pay attention to any mandatory fields or information that must be included. 2. If the invoice is in a different currency, convert the amount to the agreed-upon currency using the applicable exchange rate.

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How can you handle VAT on international invoices?

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1 Determine your VAT obligations

2 Register for VAT if needed

3 Charge and collect VAT appropriately

4 Report and pay VAT to the relevant authorities

5 Here’s what else to consider

Corporate Accounting

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